Consumers Spending More, But Not Enough to Turn Economic Tide

By:
Chris Gaetano
Published Date:
Jul 31, 2020
Recent reports indicate that consumer spending is up, but it evidently hasn't been enough to prevent a massive economic contraction.

CNBC said that consumer spending rose by 5.6 percent last month, the second consecutive increase after May's 8.5 percent jump. Despite this increase, though, the numbers remain below pre-pandemic levels and, as a result, still resulted in a record GDP contraction from the previous quarter. The Wall Street Journal said that the 32.9 percent annualized loss was attributed by the government largely to the lack of consumer spending. Spending on services, for example, fell by an annualized 43.5 percent, while spending on nondurable goods fell by an annualized rate of 15.9 percent.

MarketWatch noted that the GDP plunge would have been even bigger if not for the large amounts of federal aid that flowed into the economy, much of which was actually set aside for savings by Americans: the personal savings rate is reported to be 19 percent; while lower than May's 24 percent, it nonetheless remains much higher than its December 2019 level of 7.7 percent.

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